Californians may pay nation's highest gas taxes

CULVER CITY, Calif. 
Californians could end up paying the highest gasoline taxes in the nation when a 3.5-cents-per-gallon increase kicks in this summer.

The state Board of Equalization voted Thursday to increase the excise tax from 36 cents to 39.5 cents per gallon on non-diesel fuel beginning with the new fiscal year July 1.

The change is expected to provide more than $500 million in revenue for the fiscal year, based on consumption figures. The diesel fuel tax will remain unchanged at 10 cents per gallon.

The excise tax is levied on gasoline suppliers but is often passed on to consumers. With the increase, a driver who travels 15,000 miles a year at 20 miles per gallon would pay about $26 in additional taxes.

When federal and other state taxes are added, Californians this summer could pay the highest gas tax in the nation, averaging more than 70 cents per gallon, according to petroleum industry figures. However, the board said in a statement Friday that it "cannot predict what the selling price of gasoline will be" on July 1.

The excise tax is the largest of the state taxes on gasoline. It was increased in 2010 under a change in gasoline tax laws to help close a nearly $20 billion state budget deficit.

At the time, state sales tax provided the lion's share of gas tax revenues, but that money funded local government programs, according to an equalization board statement. The excise tax funds state highway and mass transit projects.

By reducing the sales tax on gas from 8.25 percent to 2.25 percent and roughly doubling the excise tax, the state was able to provide more money to balance its budget without raising the overall gas tax rate.

Each year, the equalization board must reset the excise tax by March 1 to ensure that the state will receive the same amount of gas tax revenue as it would have received under the old system.

"The Legislature mandated that we equalize the sales and excise taxes to avoid a net increase in taxes," equalization board Chairman Jerome E. Horton said in a board statement on Friday. "We could protest the legislation and not make the rate adjustment, however we would be violating law and arguably exposing taxpayers to even higher taxes in the future."

In making its decision, the board looks at previous revenues along with current and projected future consumption and gas prices.

While consumption is down, slightly lowering excise tax revenues, increased prices meant the state would have collected more sales tax under the old system.

Gasoline consumption has consistently fallen each fiscal year since 2005 and was 14.6 billion gallons in the 2012 fiscal year. The decrease has reduced tax revenues, according to equalization board figures.

At the same time, the overall price of gas has soared.

Average gas prices in California jumped nearly 60 percent per gallon in the past month, the Automobile Club of Southern California reported. The average price of regular on Friday was $4.235 per gallon.

The tax hike was approved 3-2 by equalization board members Jerome Horton, Betty Yee and John Chiang. George Runner and Michelle Steele voted against it.

"I cannot support a more than half a billion-dollar tax increase on struggling Californians who are already experiencing significant pain at the pump," Runner said in a statement.